Business confidence in the future of the economy is willowing towards an all-time low.
The Lloyds TSB Business Barometer shows 53 per cent of firms are pessimistic about the future of the economy, while 20 per cent are optimistic.
However, 42 per cent of firms expect business activity to increase in the next 12 months, and just 18 per cent think they will decrease.
Across the sectors, distribution firms report the weakest confidence levels, while firms in the service sector have slightly better hopes.
Boosted by a weaker currency, the industrial sector appears to be in the strongest position.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "The cocktail of a weakening in economic conditions and tighter credit means that firms are very likely to trim investment spending even further than they already have.
"And it's unlikely we'll see a quick turnaround in this trend any time soon, given the worries businesses have about a potential recession."
He added: "However, the recent fall in oil prices and declining input costs in other areas, do give reason for hope that pressure on operating margins may soon start to ease - so there are some signs of respite appearing."
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